One Year Into Russia's War on Ukraine
Ukraine Farmers Adjust, But Greater Risks Are Still Ahead
OMAHA (DTN) -- A year now since his country was invaded, Roman Grynyshyn speaks with pride about the way Ukrainian agriculture has continued to grow and sell crops despite the dangers.
Before the war Grynshyn was a travel guide and interpreter who would bring Ukrainian farmers to tour the U.S., and Americans to see Ukrainian farms. He spent much of the last year trying to raise money to help farmers in his country. Reflecting Ukraine's continued focus on farming, Grynshyn was recently at an agricultural conference in Lviv in western Ukraine, one of the safest cities in the country near the border with Poland.
"My first impressions there was that Ukrainian agriculture is alive and it is working," Grynshyn said. "Why? Because Ukrainian people are this style -- this way." He added, "The farmers, they do not give up. They contemplate their approaches. They look at what they can continue to produce."
Russian President Vladimir Putin and his advisers assumed they could overwhelm Ukraine in a matter of days when Russian tanks smashed into Ukraine following a barrage of missiles on the morning of Feb. 24 last year. But the initial assault failed to destroy military assets and faced unexpected resistance as Ukrainian citizens mobilized. Russia has since called up more than 300,000 more men to fight in the war, though Russia also has claimed to annex at least four Ukrainian territories as well.
Since then, the most current estimates show Ukrainian farmers have suffered nearly $7 billion in losses, including 84,200 pieces of destroyed or stolen machinery. An estimated 10 million metric tons (mmt) of grain-storage capacity has been destroyed. Other significant parts of Ukrainian agriculture are now in Russian-held territory.
UKRAINIAN FARMERS ADJUST
Dennis Sergiiemao is a farmer in northwest Ukraine who grows corn, soybeans, sunflowers, winter canola and wheat near the city of Rivne.
Despite being close to Russian bombers based in Belarus, Sergiiemao said he has largely avoided the worst of the year-old war. Going into the 2023 planting season, Sergiiemao said one of the biggest problems facing Ukrainian farmers is a lack of funds. They can't get operating lines to cash flow their operations. Since the war began, Ukrainian farmers have been receiving roughly half of the world price for commodities while paying skyrocketing transportation costs. Ukraine's currency against the dollar also has fallen sharply.
Sergiiemao described selling last year's canola into Germany and paying just about $165 per ton just for transportation. The canola ended up being a money loser to transport, he said.
"We have got the differential between farmgate prices in Ukraine now and the prices on a world basis," Sergiiemao told DTN.
Ukrainian farmers also will face bigger challenges this year finding fertilizer. In the past, they have relied heavily on Russia and Belarus, which are no longer an option. The lack of nitrogen is causing him to increase his soybean acres.
"I took down the number of acres growing corn simply because it requires a lot of nitrogen inputs," Sergiiemao said. "I hope to raise soybeans and it will be able to scavenge a lot of inputs from the previous crop, which was corn."
Sergiiemao also wants to boost his sunflower production because the Ukraine is such a large exporter of sunflower oil. Sergiiemao said he also must satisfy the needs of more than 700 landlords, most of whom own two-hectare tracts (just under 5 acres each). Most of those smallholder landlords want Sergiiemao to grow some wheat or barley. The landlords will then use their share of that grain for their families and sell on their own.
FOOD AS A WEAPON
As Russian ships cut off access to vital Black Sea ports, Putin's government made a strategic mistake of trying to shut off one of the world's biggest bread baskets. The statistics have become well known by now. Before the war, Ukraine was the No. 1 exporter of sunflower oil and sunflowers, as well as the world's fourth largest exporter of corn, wheat and barley. Ukraine's crop production fed an average of 600 million people globally.
"The big picture is that they tried to use food security as a weapon in the conflict," said Yuval Weber, a professor of Russian studies at Texas A&M University. "This was something in which the United Nations played a leading role in bringing together lots of countries in the Global South working directly with Turkey, in particular, to effectively shame Russia into not doing that."
Putin found himself facing enough global opposition that by last July the Russian government agreed to the Black Sea Initiative brokered by the United Nations and Turkey.
"In the big picture, Putin might be delusional, but he is quite sensitive to, basically, the limits of Russian prestige, and not doing something that will get the world more united against them," Weber said.
The Black Sea Grain Initiative agreement, as tenuous as it is, has gotten more grain and oilseeds out for exports. Since last August, the effort has moved 21.9 mmt of cargo, of which 10.3 mmt is corn and another 6.4 mmt is wheat. Lately, the volume of commodities coming out of Ukrainian ports has slowed as Ukraine and U.S. officials blame Russia for slowing down inspections. The U.N. website tracking cargo shows about 700,000 mt less in grain shipped in January compared to December.
"They try all of the time to make these inspections as slow as possible," said Antonina Broyaka, a Ukrainian refugee now working at Extension for Kansas State University, "because it gives them some competitiveness on the grain market where they can sell their grain more. So they are really interested in making this process as slowly as possible to have more control in the market and a lot of vessels just stay in line -- up to two months -- waiting for inspections."
Talks now are expected to begin over whether to extend the grain deal past March 19.
"There is a lot of political pressure on Putin to retain the agreement, but it's amazing that all of this operates in a war zone," said Joe Glauber, a senior research fellow at the International Food Policy Research Institute and former USDA chief economist.
WATCHING FROM KANSAS
Broyaka keeps a close eye on agriculture in her home country from her office in the Department of Agricultural Economics at Kansas State University. Broyaka was a dean of economics at Vinnytsia National Agrarian University in Ukraine before the war began. Having spent a year at Kansas State University in the early 2000s as a visiting scholar, university officials helped bring Broyaka and her two children to the university after the war broke out.
Broyaka' s husband remained in Ukraine. Contact with him has become spottier since October when Russia began ramping up attacks on Ukraine's electrical grid.
"It became more complicated since October after the massive missile attacks began," Broyaka said. "Since October, they have been launching regularly like 100 missiles a day."
Her experience was already in global food security and international agricultural trade before the war began.
Talking about farm production, Broyaka explaineds that Ukrainian farmers are losing money with their crops, but they have few other choices.
"If they stop their production, their losses would be higher, even if they don't have any benefits," she said. Broyaka added, "Ukrainians are very patriotic. Farmers understand. Farmers understand that they need to feed people and they need to feed their families first. If they don't do it, who will?"
Her analysis fits with Sergiiemao's take that the shortage of fuel, fertilizer and seeds will cause farmers to shift production dramatically in 2023. There will be less corn and wheat production across the country.
"This next year will be much harder than this one," Broyaka said. "Last year, farmers had something in storage. They had some seed and fertilizer. This year, we see a shortage of inputs and very high prices for those products. So it's not just that we will have less area planted, but also yields per hectare will be much lower."
Looking at the geopolitics and war on the ground, Broyaka said people expect more aggressive moves by Russia starting this week as attention turns to the anniversary. Despite Russia's losses, Broyaka said the perceptions of the war within Russia is built on propaganda and jailing anyone who dissents.
"And there is no democracy there," she said. "They are so afraid. If you say something against the government of Putin, they will send you to prison."
A lot of Russians who have been conscripted into the war come from impoverished areas of the country such as Ural. Broyaka said she has seen articles of Russian soldiers stealing appliances such as washing machines to take home.
"People are so poor outside of Moscow and a few major cities and the soldiers from these places are stealing anything they can take back with them," Broyaka said. "And the families are getting paid for their deaths."
Immediately following the invasion, calls began for the U.S. to ramp up crop production as a result. College professors took to Twitter, calling on USDA to open up more than 20 million acres in the Conservation Reserve Program (CRP). USDA last May, citing the war, allowed landowners in the final year of their contracts to terminate their contracts early.
Responding to the spikes in fertilizer prices that started before the war began, the White House also announced it would spend $500 million to expand domestic fertilizer production. USDA rolled out applications for the Fertilizer Production Expansion Program last September. In early January, USDA identified 21 "potentially viable projects" totaling $88 million in 15 states. Those final grants are expected to be announced soon. That also means USDA still has as much as $412 million to aid in the expansion of fertilizer production domestically.
In crop insurance, USDA also increased the number of counties nationwide eligible for double-cropping insurance, making farmers in 1,935 counties eligible. So far, it's unclear how much that has expanded crop production, but the ability to get insurance on a second crop "gives farmers financial security to expand the practice," USDA stated.
Globally, the U.S. Agency for International Aid was already facing high demand for humanitarian food aid before the war because of the pandemic. From 2020 to 2020, U.S. food aid rose from $10.7 billion to more than $15 billion. Within Ukraine, USAID has helped more than 13,600 farmers with seeds, fertilizer and other support, including plastic bags to store grain.
GLOBAL CROP SUPPLIES SO FAR HAVE HELD
Looking at the global supply and demand over the past year, Glauber said some increases in production and pushback from farmers globally prompted countries to dial back their initial bans -- such as Indonesian palm oil and wheat in India.
"We dodged a lot of things that could have made things a lot worse," Glauber said.
Looking at USDA's global stock carryovers into 2023, Glauber said, "Roughly we're in pretty much the same spot in terms of carryout stocks."
Beyond the U.S., global supplies are seeing better crops coming out of Australia and expected record exports out of Brazil. Ideally, the major production areas such as the U.S. will reflect strong production for the 2023 spring-planted crops.
"Any sign of drought in any major producing areas will send prices much higher," Glauber said.
USDA will release its initial forecasts on U.S. crop production and prices later this week as part of the USDA Ag Outlook Forum.
Right now, Glauber said the big potential disruption would be a lack of planted acreage in Ukraine. He noted it's already estimated Ukraine's planted wheat acres were down.
Broyaka last month highlighted numbers from Ukraine. Overall planted acres are down 37% to a forecast of 14.12 million acres. For the winter wheat crop, the largest chunk of acreage, planting is down 39% to 9.28 million acres.
The forecast for Ukraine's spring crops could look similar in acreage losses.
"Most of the private analysts in Ukraine are already talking about 2023 spring planting being adversely affected," Glauber said.
DESTROYING CRITICAL INFRASTRUCTURE
Russian attacks on the electrical grid have taken several forms. One aggressive move is draining water from the Kakhovka Reservoir. The river has dropped about three meters since Russians opened up floodgates last November. The 830-square-mile reservoir generates hydro-electric power, but its water is also used to cool one of Europe's largest nuclear power plants -- which could lead to an ecological disaster. The Kakhovka provides drinking water for millions of people and irrigation for as much as 750,000 acres of area crops in south-central Ukraine along the Dnipro (Dnieper) River, Ukraine's largest river. The draining of the Kakhovka Reservoir caught the attention of former Agriculture Secretary Dan Glickman.
"We've kind of focused a lot on this whole issue of grain exports and shipping, but what's concerning to me is the Russian bombardment of agricultural infrastructure," Glickman said, pointing to both rail lines and the draining of the lake. "It just struck me that the Russians are attempting to absolutely destroy the infrastructure of Ukraine, totally. They can't go out and destroy all of the farmland, but they can destroy access to the products around the world. It just hasn't gotten as much as attention. The water supply kind of concerns me."
Also see, "Six Key Challenges Facing Ukrainian Farmers in the Midst of War,"
"Todd's Take: Are Ukrainian Farmers an Endangered Species?"
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN
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